Wednesday, March 13, 2013

Message to retailers: Greedy for increased profits? Then pay rank-and-file staff more

Costco's CEO Craig Jelinek is an outspoken proponent of an even-higher minimum wage than the one proposed by Obama in the most recent State of the Union address. Costco is, in fact, a sort of poster child for higher salaries for front-line retail employees.

Most retail employees earn less than Obama's wished-for $9/hour minimum rate. And while Republicans howled that raising the minimum to that level would bankrupt businesses or, at the very least cause them to stop hiring altogether, Costco's latest quarterly report proves that it's far-more-generous pay-and-benefits package hasn't hurt profits. In fact, Jelinek believes it's helped the retail giant to a quarterly profit of $537 million -- a 35% increase over the same quarter last year. By coincidence, Costco's per-employee profit is about $10,000, which is about 35% more than Walmart's.

Vice-President Joe Biden was disappointed that Costco didn't carry shotgun shells, but otherwise pleased that Costco co-founder Jim Sinegal (center) and current CEO Craig Jelinek generally support progressive policies. Jelinek recently suggested that $10.10/hour would be an appropriate minimum wage.
The average Costco worker earned $45,000 last year -- almost triple the average employee of Sam's Club (a similar warehouse store owned by Walmart). The majority of Costco's full- and part-time workers are covered by health insurance, too.

According to Jelinek, “At Costco, we know that paying employees good wages makes good sense for business. Instead of minimizing wages, we know it's a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty."

While Trader Joe's will never release profitability figures, it's certainly another highly profitable retailer that offers far better than average salaries to customer-service staff. When I was researching my book, Build a Brand Like Trader Joe's, I found tons of evidence to suggest that the correlation between higher wages and higher profits is general; it's not something that only works for certain retailers, like Trader Joe's and Costco. In Trader Joe's case, higher wages allow the chain to selectively hire the kinds of employees who will build the store's unique, idiosyncratic brand, too.

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